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For assessment year 96-97, the learned assessing officer, on examination of the profit and loss account of the assessee and the details obtained during the course of hearing under section 143 (3)of that year found that assessee company has provided interest of Rs. 71,03,37,564/- on deposits collected under GFDA scheme floated by assessee and debited the same to the profit and loss account by applying the average rate of interest on the balance amount of deposits bypassing monthly credit entries in the interest payable account without crediting the corresponding interest accrued on each individual deposit to the individual depositors account. As assessee did not deduct any tax from the above interest provision credited to the interest payable account, ld AO was of the view that provisions of section 194A of the act are applicable. Therefore, assessee was issued a show cause notice with respect to the applicability of provisions of section 201 (1) of the act and why interest under section 201 (1A) may not be charged.

Shanti Prime Publication Pvt. Ltd.

Section 194A & 201 of the Income-tax Act, 1961—Deduction of tax at source—Interest relatable to any individual depositor whether credited directly to his account or credited to some other account like interest payable account, suspense account, etc exceeds Rs. 2500/- , the assessee is liable to deduct tax at the time of such credit of interest, however, if a consolidated entry in respect of a number of depositors is passed and the assessee claims that interest payable to each of the depositor is less than Rs. 2500/- there is no tax liability, therefore, AO has wrongly conducted that the provisions of section 194A(1) laid down that tax has to be deducted from the interest credited to the interest payable account irrespective of payment of interest to be individual parties provided the total amount of interest credited exceeds Rs. 2500/-, therefore assessee cannot be treated as an assessee in default under the provisions of section 201(1) - DY. CIT V/s SAHARA INDIA FINANCIAL CORPORATION LTD. - [2020] 183 ITD 266 (ITAT-DELHI)

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